Incorporating - The options

by The FindLaw Team

Unless a community organisation takes the step of incorporating, it is simply a group of people doing something together, with no legal identity apart from that of its individual members.

The two most suitable for community groups are:

  • as an association under the Associations Incorporation Act 1984
  • as a company limited by guarantee under the federal Corporations Act 2001.

Some groups also incorporate as cooperatives under the Co-operatives Act 1992.

Why incorporate?

A group without a separate legal identity relies on its members to act in their own name on the group’s behalf. Members who make and implement decisions – often the committee – are (usually) ultimately responsible for the group’s debts and other legal obligations.  Incorporation gives the organisation a separate legal identity, and limits the personal liability of its committee and members. This protection is called limited liability.  Incorporation is also usually required before the group can receive a government grant.  Community legal centres can sometimes help local groups prepare for incorporation by reviewing forms and documents before they are lodged, or by recommending an appropriate solicitor. The Law Society of NSW also gives referrals.

Incorporating as an association

To be eligible to incorporate as an association under the Associations Incorporation Act, a group must have:

  • at least five members
  • a set of objects and rules
  • a purpose other than making its members wealthier.

This does not mean that the group cannot provide facilities or services to members, nor does it prevent members from receiving fair payment for work done for the association or a fair return on money lent to it. However, any such payments of wages and interest must be incidental to the running of the association.

Who is not eligible?

Some groups that would otherwise be eligible to incorporate under the Act may have their applications questioned or refused because of the nature or scale of their activities. This is to ensure that a group in a position of great trust, or responsible for large amounts of money or property, has more rigorous audit and disclosure obligations than are imposed under the Associations Incorporation Act.

Where to get advice

A group planning to incorporate as an association can contact the Office of Fair Trading, which administers the Associations Incorporation Act, for advice and information.
The office has application forms and information on:

  • eligibility to incorporate
  • the process of incorporating, and
  • requirements after incorporation.

These are also available online at their website.

Cost of incorporation

The initial cost is $145 ($40 to reserve a name for the association and $105 to apply for incorporation).   The only compulsory ongoing cost is a $45 fee, which must be paid when lodging a statement with the Office of Fair Trading each year.

Incorporating as a company limited by guarantee

Incorporating as a company limited by guarantee gives no better protection than other forms of incorporation. Generally speaking, companies are more expensive to incorporate and have more administrative requirements than incorporated associations.  Unlike incorporated associations, which must have at least five members, a company limited by guarantee may have just one member.

What does limited by guarantee mean?

The ‘guarantee’ simply means that members guarantee to contribute an amount, up to a pecified maximum, if the company needs to be liquidated and its assets are not sufficient to pay its debts (that is, a member’s individual liability is limited to the amount of the guarantee). The guarantee may be for a nominal sum.

Who should incorporate as a company?

Organisations that deal with large sums of money or conduct substantial trading activities are most likely to adopt the company structure. Incorporation as a company also provides automatic Australia-wide registration, and is often used by groups wishing to operate regularly outside NSW.



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